How To YieldBoost LLL From 1.6% To 12.6% Using Options
September 20, 2017 at 13:58 PM EDT
Shareholders of L3 Technologies Inc (LLL) looking to boost their income beyond the stock's 1.6% annualized dividend yield can sell the January 2018 covered call at the $190 strike and collect the premium based on the $6.90 bid, which annualizes to an additional 11% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 12.6% annualized rate in the scenario where the stock is not called away. Any upside above $190 would be lost if the stock rises there and is called away, but LLL shares would have to climb 0.6% from current levels for that to happen, meaning that in the scenario where the stock is called, the shareholder has earned a 4.2% return from this trading level, in addition to any dividends collected before the stock was called.